Nov 30, 2016

'Insurtech?' Insurers Are Wrestling With Digital Innovation

Disintermediation is finally attacking the most stable - and hidebound - of the financial services. JL

Business Insider reports:

The global insurance industry is worth nearly $5 trillion, and
insurance companies are at risk of losing share to new entrants.because these legacy players have
been even slower to modernize than their counterparts in other financial
services industries. This has created an opportunity for insurtechs. These startups are leveraging new
technology and a better understanding of consumer expectations to
increase efficiencies in the industry.

BI Intelligence

Nearly all global insurers in a recent FIS survey claim they're struggling to incorporate digital innovation into their business.

This is despite the fact that the vast majority of respondents agree that if they fail to innovate, they could lose market share to new entrants.
Reinsurers seem to have more confidence in their innovation efforts, however, compared with their direct counterparts.
Here are the main findings of the study:

Virtually all insurers say they face obstacles to digital innovation. In fact, 99.6% of insurers surveyed admitted they face obstacles in implementing digital innovation and delivering it to consumers.

The majority recognize that they need to innovate to meet business challenges. Eighty percent of respondents strongly agreed or agreed that their business needs to innovate digitally to be able to meet key business challenges. Meanwhile, 12% were neutral; and 9% either disagreed or strongly disagreed.

The majority agree that they need to innovate or risk losing market share. Eighty-six percent of those surveyed either strongly agreed or agreed that they need to innovate to prevent loss of market share to competitors. At the same time, 10% felt neutral; and 5% either disagreed or strongly disagreed.

Sixty percent of reinsurers are confident that they're as innovative as their competitors. This compares with 49% for non-life insurers, and 47% for life insurers.

Reinsurers' collaborative approach to insurtechs may suggest a solution for direct insurers. Munich Re partnered with Trov in September, and Simplesurance in October, while Swiss Re launched an insurtech accelerator in May.
Such collaborations allow reinsurers to leverage new entrants' technologies, rather than creating them in-house at a higher cost. Direct insurers should consider mimicking this strategy as more insurtechs enter the fray, which would allow them to simultaneously solve their own innovation struggles and turn potential rivals into partners.
The global insurance industry is worth nearly $5 trillion, and insurance companies are at risk of losing a share of this valuable market to new entrants. That's because these legacy players have been even slower to modernize than their counterparts in other financial services industries.
This has created an opportunity for a group of firms known as insurtechs. These startups are leveraging new technology and a better understanding of consumer expectations to increase efficiencies in the insurance industry. Some are helping incumbents deliver better end products, while others are directly competing with legacy players.Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on insurtechs that looks at the drivers behind the increasing number of insurtech companies, how they are helping or disrupting legacy players in the insurance industry, and where legacy players are innovating off their own backs. Here are some of the key takeaways from the report:

The opportunity is currently biggest in the US and Europe. That's because these regions have large, very mature insurance industries.

Insurtechs' products and services mostly target retail customers. This includes small businesses and consumers.

Most insurtechs are acting as enablers. This means that they offer products and services that help insurers and reinsurers improve their processes and better serve customers.

Of the main players in the insurance industry, brokers are most at risk of disruption. This is because insurtechs can easily replicate their services and are solving historical industry problems faster than legacy players.

Legacy players are also innovating. In particular, insurers and reinsurers are investing in insurtechs and fintechs working with relevant technologies. At the same time, they are improving their own direct-to-consumer digital interfaces, increasing their disruptive threat to brokers.

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As a Partner and Co-Founder of Predictiv and PredictivAsia, Jon specializes in management performance and organizational effectiveness for both domestic and international clients. He is an editor and author whose works include Invisible Advantage: How Intangilbles are Driving Business Performance.Learn more...